Cryptocurrency

So you can’t turn on CNBC today or any other financial news network and not hear something about Bitcoin, Ethereum or one of the other crypto currency’s, but from a layman’s point. What is crypto currency? Is it sustainable and is it a viable form of payment throughout the world. For something entirely virtual, Bitcoin and digital currencies have caused a very real uproar. Everyone from central bankers to anarchist and cypherpunks have queued up to give their thoughts and feelings on “decentralized online currency”, as the US Treasury describes it. Is Cryptocurrency the greater leveler that many claim? Or is it, as others argue, an unruly upstart that threatens to send the monetary system into chaos. Will it only be sustained by individuals on the “dark web” or will major e-commerce players continue to adopt and embrace the next leap in economics.

What is cryptocurrency?

Wikipedia defines cryptocurrency (or crypto currency) as a “digital asset designed to work as a medium of exchange that uses cryptography to secure its transactions, to control the creation of additional units, and to verify the transfer of assets.”

Is Cryptocurrency sustainable?

The arguments around Digital/Crypto Currency will rumble on. But, from a sustainable finance perspective, is it worth the fuss? The answer is most definitely yes. Credit Cards came in to being in the late 50’s early 60’s with Diners Club and Caret Blanche. The dominance of physical cash as an instrument of exchange is dwindling fast. Expect more and more alternative currencies to join the list of over 1100 current Crypto Currencies. As there will always be bartering and there will always be people who want to avoid being under government control there will always be a market for non controlled currencies.

Upside of Crypto Currency

Let’s start with the positive. Bitcoin, being the largest of the currencies works as a pretty effective medium of exchange. As a digital currency, it effectively bypasses the intermediary role of banks, with their expensive credit cards and high processing costs. That makes online transactions smoother and cheaper, as well as providing more flexibility for financing projects.

“The banks have held back innovation in money for so long. So the fact that there are discussions in Silicon Valley about payment systems like Bitcoin has to be a good thing,” says David Boyle, an independent specialist in alternative economics and author of Funny Money.

The fact of direct exchange bodes well for internet entrepreneurs and traditional businesses too. Right now, if you design a high-transaction business that requires online payments in tiny amounts – say $.99 or less – bank charges make it a non-starter. Digital currency changes that.

People like Bitcoin for political reasons too. That’s mostly because it removes control from central governments and the central banks beholden to them. Instead, Bitcoin generates its own money. Perform an internet search on Google or Bing for ‘cryptographic hash function’ and you’ll quickly get a feel for the basic nuts and bolts of how the process works. But for most Bitcoin advocates, the specifics are less important than the principle: the decentralization (and democratization) of money supply is what wins the digital currency a thumbs-up, not the complex algorithmic computations underpinning it.

Downsides of Crypto Currency

The downsides, however, are only too apparent. Stories abound about how the high-profile digital currency is the coinage of choice for the ‘darknet’, used for everything from arms running to money laundering. The closure a few years ago of Silk Road, an online narcotics marketplace beloved of Crypto currency users, hit the reputation of the digital currency hard.

Being unregulated and exclusively online, the currency is vulnerable to theft too. Gone are the days of muggers knocking you on the head and stealing your purse. Now they just need to hack your Bitcoin account. The Mt. Gox hack is perhaps the best known, partly because it sent the value of the currency plunging and by May 2016, creditors of Mt. Gox had claimed they lost $2.4 trillion when Mt. Gox went bankrupt But there are plenty of other examples too.

Bitcoin suffers two other major downsides, neither of them headline-grabbers but important nonetheless. First, the idea of an alternative currency isn’t that new. Recent decades have seen waves of other examples, says Leander Bindewald, a currency expert at the New Economics Foundation, a London-based think tank. Think Local Exchange Trading Systems in the 1980s, Time Banking in the 90s, and “transition currencies” such as the Brixton Pound or online community exchange systems more recently.

Nor is Bitcoin actually that unique. Ethereum, Litecoin, Namecoin, Peercoin and a myriad of other crypto currencies like them are all based on a similar premise and adopt similar technologies. It’s just the narrative around Bitcoin – its claims to disruption, its decision to set the total issuance of Bitcoins at a fixed amount, and so on – that cause it to stand out, Bindewald claims.

“There’s a lot of discussion now about how Bitcoin is interesting as a payment mechanism and a governance paradigm. But the currency that everyone knows is pretty uninteresting – it’s just a proof of concept that the payment mechanism and governance paradigm actually work,” he adds.

Technobable

There are many articles out there for the technical specs of crypto currency such as Blockchain descriptions or a detailed explanation of crypto currencies .

Crypto Currency is here to stay and as your major e-commerce companies adopt the ability to pay with Bitcoin or Ethereum it will only help them continue further.